If you are in the business of patents, you know that recently there has been a lot of buzz about false marking. The buzz is the result of the case Forest Group v. Bon Tool, where the Federal Circuit, on appeal from the US District Court for the Southern District of Texas, proved that the courts are willing to penalize companies – quite stiffly – if they mark their products with a false or deceptive patent reference. 590 F.3d 1295 (Fed. Cir. 2009). This case created a wave of panic through manufacturers, who were suddenly concerned that an unintentional error, such as continuing to mark products with an expired patent, could cost their companies millions, if not billions or trillions, of dollars.

Forest Group v. Bon Tool: Indicating that a Mistake may be Costly

Bon Tool sued Forest Group claiming the company falsely marked its stilts with a patent that no longer covered the products in order to intentionally deceive the public. Bon Tool cited Section 292 of the Patent Act, which maintains that it is “false marking” to mark as patented an unpatented article if done with the intent to deceive the public. The Court found that Forest Group committed false marking for its latest production run because it clearly knew the commercial product did not meet the patent claims.

The case became notable because, on appeal, the Federal Circuit held that a $500 maximum penalty attaches to each individual product that is falsely marked, even if the product is unintentionally marked with an expired patent. The ruling supplanted the former "per occurrence" standard - which maintained that the mismarking of multiple articles or an entire product line as a single statutory violation - with a "per article" standard. While the Federal Circuit clarified that this $500 penalty is a ceiling and the actual per-product penalty could be as low as a fraction of a penny, it still intended to create some motivation for false marking plaintiffs to bring such cases.

The decision was met with instant reaction throughout the patent world. While it certainly seems to deter counterfeiters and patent infringers, it also potentially penalizes those companies that have products that are unintentionally marked with patents that may have expired. In this regard, the primary concern was that patent “trolls” would begin to file suits against patent holders in an effort to profit off of their mistakes. The concern was justified: since the case was decided, over 250 false marking cases have been filed. Most of these cases have been based on the marking of products with expired patent numbers.

Pequignot v. Solo Cup Co.: Narrowing the Scope

However, in June, the Federal Circuit limited the potential reach of the claims under Section 292, which may serve to deter future suits. In the case Pequignot v. Solo Cup Co., the Court held that while Section 292 applies to products marked with expired patents, the presumption of intent to deceive the public is weaker in such cases than in cases involving defendants that used patent markings on products that actually never were protected by patents. No. 2009-1547 (June 10, 2010). The court explained that advice of counsel and commercial reasons for continued marking past a patent's expiration date may be considered in assessing whether the defendant had an “intent to deceive” the public. The court also held that there was no intent to deceive the public when the patentee included language on packaging stating that the product "may be covered" by patents.

The case was brought by a patent attorney, Matthew Pequignot, in 2007. Pequignot filed a qui tam suit against Solo Cup, a maker of plastic cup lids, for marking its lids with expired patents. A qui tam action under Section 292 allows any person to obtain damages against a defendant with the requirement that the person evenly split the award with the Federal Government. With a maximum damage award of $500 per article on a total of over twenty billion articles, Pequignot sought a damage total exceeding $10 trillion.

In 2009, the US District Court for the Eastern District of Virginia granted Solo Cup summary judgment. Pequignot v. Solo Cup Co., 646 F.Supp. 2d 790 (E.D. Va. 2009). The Federal Circuit affirmed, holding that, while a product embodying an expired patent is indeed an “unpatented article” under Section 292(a), a plaintiff must demonstrate that the defendant intended to deceive the public in order to succeed under Section 292. In its decision, the Federal Circuit noted that Solo Cup’s actions did not demonstrate an intent to deceive. Evidence of this was that Solo Cup had marked the products with the expired patents because it was attempting to avoid the cost and disruption of making new molds when each patent expired and its actions were based upon its counsel's advice. Further, Solo Cup provided evidence that it replaced its molds with new ones that did not include the expired patent numbers as the older molds wore out. Solo Cup also established that later - and again based on attorney advice - it had added the following language to its packaging: "This product may be covered by one or more U.S. or foreign pending or issued patents. For details, contact www.solocup.com." Solo Cup included this language on all packaging, regardless of whether the products were actually covered by patent.

This case is notable because, while it declined to carve out expired patents from the reach of Section 292, it did serve to limit the scope of the Forest Group v. Bon Tool holding and therefore may give patent holders some refuge in the event they unintentionally mark a product with patent information from an expired patent. Further, it seemed notable that Solo Cup acted in reliance on its counsel’s advice that it was not required to immediately make the change.   

Develop a Patent Protocol

Patent holders should still take steps to ensure that they are protected from the patent “trolls” that have begun to file actions since the Forest Group holding. By developing a protocol for monitoring and managing your patent portfolio, a company could save millions of dollars. While the protocol should be tailored to meet the needs of each manufacturer, it should function under the key personnel at an organization. You do not want a temporary or short term employee to be responsible for your patents. In addition, the protocol should contain one or all of the following components:

• Identify one person in your company to be responsible for keeping a list of all patented articles and the dates that the patents expire. On an annual basis, this same person should go through the list to ensure that all articles are still covered by current patents. When a patent expires, the person should be responsible for putting the appropriate persons on notice to ensure steps are taken to remove the patent number/reference from the appropriate products and molds.
• Work with your patent counsel to ensure that all listed patents include at least one claim that under a reasonable construction covers the marked product.
• Update your patent counsel as to any changes in your product's design that may need to be incorporated into a patent application. Work with counsel to ensure that the redesigned product is protected by the patent before marking the product with a patent number.
• Prior to marking any product with a patent number, analyze final product designs with patent counsel to ensure the product design is covered by one or more of the claims of the patent.

Arent Fox is monitoring this issue and working with its clients to ensure their patents are managed and protected in accordance with the laws. Please contact Anthony V. Lupo or Sarah Bruno if you have any questions.

Anthony V. Lupo
lupo.anthony@arentfox.com
202.857.6353

Sarah L. Bruno
bruno.sarah@arentfox.com
202.775.5760